THE IMPORTANCE of TRANSPARENCY in CORPORATE GOVERNANCE: the FIFA and UEFA CASES LLM International Business Law, Tilburg Law Sc

THE IMPORTANCE OF TRANSPARENCY IN CORPORATE GOVERNANCE: THE FIFA AND UEFA CASES

LLM International Business Law, Tilburg Law School

Supervisor – Prof. Erik P.M. Vermeulen

Author – Volodymyr Kravets

June 10, 2016

Tilburg

Contents Introduction………………………………………………………………………………………………………………………….3 1st chapter…………………………………………………………………………………..…………………………….………… 5 Establishment and development of FIFA and UEFA……………………………………………………………….5 2nd chapter.……………………………………………………………………………………………………………………..…...8 Structure of FIFA and UEFA ……………………………………………………………..…….………………………….…8 3rd chapter …………………………………………………………………………….…………..…………………………….…16 Features and characteristics of non-profit organizations ……………………………………….……………16 4th chapter ……………………………………………………………..……………………………………………….……….…20 Financial performance of FIFA and UEFA ………………………………………………….…….………………..…20 5th chapter……………………………………………………………..………………………………………………….….….…23 5.1 Role of stakeholders……………………………………………………………..………………..………….……….…23 5.2 How the main stakeholders influence on FIFA and UEFA…………………………….…………………26 6th chapter ……………………………………………………………..………………………………………….…………….…29 6.1 New challenges for FIFA and UEFA ……………………………………………….…………….……..…………29 6.2 Lack of transparency in making decisions ……………………………………………..…….…………..……31 7th chapter ……………………………………………………………..…………………………………………….………….…33 7.1 Ways of future development ……………………………………………………………..………..……………….33 7.2 Possibility and benefits of invitation of independent CEO.…………………………….………………34 7.3 Possibility and benefits of FIFA and UEFA merger………………………………………………………….35 Conclusion ……………………………………………………………..………………………………………………….…….…40 Bibliography……………………………………………………………..………………………………………………..…….…41

Introduction Pierre de Coubertin, the founder of the modern Olympic Games once said: "Sport is part of every man and woman's heritage and its absence can never be compensated for1." For over several decades a deep concern about the governance standards of sport have surfaced in the global community. In the past couple of years, however, the accumulation of scandals in sport has grown so intensely that the credibility of sport and its organizations is shaken fundamentally, threatening the public trust in sport as a lever of positive social and cultural values in democratic societies2. Everybody knows what football is, somebody calls it soccer. There is no other issue or event in the world which can unite people of different countries, nationalities, and religious as good as football. Some people think that this is just a simple game. For most people it’s not just a game, its culture, philosophy and passion. For somebody football is a whole life. But football is not organized chaotically. It is very professionally governed, structuralized and managed. The most successful and well known football organizations in the world are Federation Internationale de Football Association (FIFA) and a Confederation recognized by FIFA – The Union des Associations Europeennes de Football3 (UEFA, English version the Union of European Football Associations). Both organizations are neutral politically and religiously situated in Switzerland and are registered under Article 60 of Swiss Civil Code. Both associations had scandals for the last few years and both replaced their presidents. The fact of being of great value of this topic is a justification for both FIFA and UEFA believably the brightest examples of how the neutral associations can have a global impact and how transparency is important in their decision making. This example shows that reputation can be more influential than real enforcement. Within the time football had grown from just an interest of a Sunday match to a global concern of system of values which have impact on current life of million ordinary people, governments, countries and the whole continents. For instance of case the particular country gets the opportunity to host the tournament like FIFA World Cup 2014 or UEFA EURO 2012, it changes development of the country significantly. First of all, ordinary citizens feel the responsibility and global destiny of their country because of the attention of the whole world and capacity to invite and to host tourists and football supporters from all over the world. Then the economy of the country changes to the frame of tournaments requirements in response to build new stadiums, hotels, roads and other infrastructure needed for the comfortable hospitality. Considering above mentioned, the importance of FIFA and UEFA efforts of organizational conducts is difficult to overestimate. These organizations have a great social impact in modern world. FIFA and UEFA both participate in struggle against all forms of racism and discrimination, violence and hooliganism, and match-fixing. FIFA and UEFA spread the values and principles which are acceptable in every country in the world. But the new world is emerging and global relationship mean that we can

1 Pierre de Coubertin (1863-1937), French pedagogue and historian, founder of the modern Olympic Games. 2 Danish Institute for Sports Studies: Action for Good Governance in International Sport Organizations, p. 6. 3 Article 1 of the UEFA Statutes, 2016 edition

3 no longer rely on traditional forms of coordination which were oriented around hierarchical and command and control based relationships4. All of the stakeholders in associations like FIFA and UEFA are less comfortable with the idea being told what to do and they will opt to leave if the working environment fails to deliver. In the past, such fixed organizational forms provided a source of comfort, but now it merely frustrates or irritates. In its statutes UEFA formally declares that it is a sporting authority which does not have the powers of a government, it represents Europe’s national football associations, and can only act in accordance with the wishes of these associations5. The last example with so called Panama Papers showed that now for the global community it is not enough just to face the legal requirements, and avoiding illegalness doesn’t keep you in safe, because when the organization declares transparency and honesty but doesn’t hold it – troubles will appear very soon. The Prime Minister of Iceland resigned because of being not honest with his citizens. Honesty means a lot. Honesty means trust. For example the whole banking system is built on trust. Let’s imagine the situation when the clients do not trust a bank anymore. It is needed only 20 percent of clients to withdraw their deposits and the bank will collapse. The same is with FIFA and UEFA if people won’t trust them and won’t believe in values they expose, there will be no value of what they are doing, sponsors and official partners won’t support them, those associations will be destroyed from inside. The FIFA and UEFA both have very pure purposes for the world like policy against discrimination, against racism, but at the same time they have many internal problems, and there are always scandals with transparency in policy of decision making. The FIFA and UEFA are both non-governmental and non-profitable, but at the same time they are associations with colossal revenues, unprecedented global reach, political weight, and tremendous social influence. This unique status, setting sports organizations apart from both non-governmental organizations and commercial corporations, constitutes a challenge for specifying the exact best governance practices applicable to them6. At the same time the FIFA and UEFA conduct these activities with lack of transparency. Principles of transparency and honesty are very important because the global communication is based on trust. Without trust to government commonly it will end up with governmental resignation, when people don’t trust to private company it means the company can become bankrupt, but if people stop believing in such organizations like FIFA and UEFA the system of global traditional values can collapse. The best explanation of worlds harassment about screaming violence of basic principles and unwilling to develop the organization’s transparency, its activity and performance can be the former FIFA President’s Mr. S. Blatter quotation: "Let it be as it is and let's leave (football) with errors. The television companies will have the right to say (the referee) was right or wrong, but still the referee makes the decision — a man, not a machine.7"

4 Mark Fenwick, Erik P.M. Vermeulen: Disclosure of Beneficial Ownership after the Panama Papers, p. 33. 5 Article 2 of the UEFA Statutes, 2016 edition 6 Danish Institute for Sports Studies: Action for Good Governance in International Sport Organizations, p. 104-127 7 http://www.cbc.ca/sports/fifa-halts-instant-replay-experiment-1.695604

1st chapter Establishment and development of FIFA and UEFA The FIFA is an association founded on 21 May 1904 in Paris now based in Zurich and registered in the Commercial Register in accordance with art. 60 ff. of the Swiss Civil Code8. The FIFA was established as a non-profit organization and governed by Swiss law. The first countries that formed it were: France, the Netherlands, Belgium, Denmark, Portugal, Sweden and Switzerland. Now, it has reached to 209 member associations. Because it was established in France, the French abbreviation of its name is still used (Fédération Internationale de Football Association – FIFA) worldwide. Robert Guérin was the first President of the Association – a 28 years old French journalist. It is interesting that the first member country outside Europe was South Africa, which joined FIFA in 1908. Since 1930 FIFA organizes the World Cup, which became the most watched sporting event in the world, exceeding even the Olympic Games. In 1932, taking into account a great depression, FIFA decided to move its headquarters to neutral Switzerland. From that time FIFA had accepted more than two hundred new members that influenced on corporate structure and actions of the organization. UEFA was established on 15 June 1954 in Basel, Switzerland. The first UEFA president was Ebbe Schwartz and the first general secretary was Henri Delaunay who very soon was succeeded by his son Pierre Delaunay. In honor of Henri Delaunay, the UEFA European Championship trophy awarded to the winner is named after him. The main building principle of those who established the organization in the 50’s was the fostering and development of unity and solidarity among the European football community. Now six decades later, UEFA’s mission remains very much the same. But it has also become the guardian of football in Europe by working closely with its 54 member associations to promote, protect and nurture the sport at all levels, from the elite and its stars to the millions who play the game as a hobby9. Till now UEFA was developing very gradually but steadily. The association started with just three employees and now amount of people working at UEFA’s administrative headquarters estimates over five hundred. The UEFA had changed few times the residence of its headquarters. First attempts of establishment were in Paris, France in 1953. Then it was officially established in Basel, Switzerland in 1954. In 1960 it moved the headquarters to the Swiss federal capital Berne for more than thirty years. From 1995 till now for more than twenty years the address of the UEFA’s headquarters is: Switzerland, Nyon, Route de Geneve, 46. Unlike FIFA which started with seven member associations UEFA started with 31 and in 2015 it counted 54 associations. The number increased rapidly at the beginning of 1990s, with the Eastern European political changes and the Soviet Union collapse when each of the sovereign country had its own football association. In 2016 Kosovo association joined the UEFA as 55th member. UEFA has developed from a mainly administrative body into a dynamic sports

8 FIFA statutes 2015 edition, p. 6 9 UEFA official web site - http://www.uefa.org/

5 organization that promotes, protects and develops European football keeping a pace with the rapidly changing landscape of modern-day football10. Every two years a great tournament takes place, whether it is FIFA World Cup or UEFA Euro competition (each tournament takes place every four years) which attracts people from all over the world. In summer 2016 the whole world will pay attention to France because of the UEFA EURO 2016. It is expected that near 2.5 million of tourists will visit France just for purpose of the tournament and spend approximately 1 billion Euros11. But except the above mentioned events the FIFA and UEFA organize a variety of contests for men, women, youth and even amateur players. FIFA currently is responsible for organizing worldwide the next tournaments12: the FIFA World cup – as the most spectacular and exciting tournament among all kinds of sport in the world; the FIFA Confederations Cup – the tournament in which only participate the national teams the winners of every continent (UEFA, CONMEBOL, CONCACAF, CAF, AFC and OFC), plus the FIFA World Cup winner and the national team of the hosting country13; the Olympic Football Tournaments, thereby also taking into account the Olympic Charter; the FIFA also organizes variety of competitions for youth and adults such as: the FIFA U-20 World Cup, the FIFA U-17 World Cup for men and the FIFA Women’s World Cup, the FIFA U-20 Women’s World Cup, the FIFA U-17 Women’s World Cup – for women, and also the FIFA Futsal World Cup, the FIFA Beach Soccer World Cup and the FIFA Club World Cup – for the professional football clubs. The importance of the tournaments organized by FIFA is difficult to overestimate, because for example the last FIFA World Cup in Brazil watched half of a planet in 207 countries all over the world. Just the final game counted up to 1 billion in-home and out-of-home audience and the whole tournament watched approximately 3.2 billion 14 . On the other hand the European competitions are watched starting from June till May and for one night only of the UEFA Champions League Final near 300 million watched annually15. UEFA currently holds a jurisdiction to organize or abolish 15 competitions in Europe and mentions that FIFA competitions shall not be affected by this provision 16 . Except the most popular the UEFA Champions League, which is held annually, and the UEFA EURO tournament which is held once for four years it organizes a variety of contests for men and women youth of different ages: UEFA under 21 Championship, UEFA under 19 Championship, UEFA under 17 Championship, UEFA Youth League – for men; UEFA Women’s Euro, UEFA Women’s Under 19 Championship, UEFA Women’s Under 17 Championship, UEFA Women’s Champions League – for women; futsal competitions (UEFA Futsal EURO – for national futsal teams, UEFA Futsal Cup – for professional futsal clubs); professional football clubs competitions (UEFA Europa league, UEFA Super Cup); UEFA Regions’ Cup – the first tournament for amateur football players.

10 UEFA official web site - http://www.uefa.org/ 11 http://www.tourism-review.com/france-euro-2016-to-bring-1-billion-euros-through-tourism-news4656 12 Article 15 of the FIFA Governance Regulations, 2016 edition 13 FIFA Confederations CUP, Fact Sheet, available at http://www.fifa4s.com/fs-207_01e_fcc.pdf 14 FIFA World Cup Brazil 2014: Television Audience report, p. 7 15 http://www.sportskeeda.com/football/champions-league-final-at-wembley-drew-tv-audience-of-360-million 16 Article 49 of the UEFA Statutes, 2016 edition

At a global level, the sport constitutes an extraordinary success story of civil society. Few events or associations of civic organization can have the same level of global inspection, consumer and participatory interest. Till now, football, like anything, has frequently been caught between the desire to maintain the cherished traditions that have sustained it, and the imperatives demanding modernization and transformation17.

17 Matthew Holt: UEFA, Governance, and the Control of Club Competition in European Football, 2009, p. 21

2nd chapter Structure of FIFA and UEFA This chapter introduces the structure of FIFA and UEFA. There are issues about propositions of improvement of the structure and reform of the FIFA and UEFA. For the comparison the structure of the Council of Europe and International Olympic Committee will be presented as an example of wisely organized and transparent organization. The FIFA and UEFA take care about organizing football. FIFA worldwide and UEFA only in Europe. These organizations have variety of reports: financial report, activity report, report of development of women football, on how they perform and develop the game18 but still remain too closed for the society. The FIFA and UEFA have many similar features: both have the same legal form of association and registered under article 60 of Swiss Civil Code; both are neutral non- governmental organizations; both are non-political organizations; both are no-profit organizations; both have headquarters in Switzerland (FIFA in Geneva and UEFA in Nyon). The corporate structures of FIFA and UEFA are very similar. The supreme body of both entities are their congresses. They both are chaired by their presidents. And they both have many of committees. The Secretariat is responsible for the assistance and support of above mentioned bodies. The Secretariats of both FIFA and UEFA are ruled by General Secretary. The structure of FIFA can be observed schematically as follows:  The FIFA President – holds the highest post in the FIFA structure. FIFA created the highest office for the president who is elected for four years and can be re-elected. The president represents FIFA with other authorities, he is also a chairman of the Congress, Executive and Emergency Committee meetings. The President in empowered to appoint many employees of the FIFA. The FIFA President is responsible for the implementation of the decisions the Congress passed. The right to be re-elected as a president allowed the last three respectable persons like Sir Stanley Rous (1961-1974), Joao Havelange (1974-1998) and Joseph S. Blatter (1998-2015) together to hold the position of the FIFA President for 54 years;  The FIFA Congress – the FIFA Congress is a world football parliament, the supreme and at the same time legislative body. It counts 209 member national associations. There are two formats of the Congress: Ordinary and Extraordinary. The Ordinary Congress shall be held once a year and Extraordinary – at any time of FIFA Council demand or one-fifth of the member associations. During the Congress meeting every national association has one vote. First of all Congress has a legislative function, but also now only the Congress is empowered to 19 : election of the FIFA President, election or dismissal of the chairpersons, deputy chairpersons and members (of Disciplinary Committee, Ethics Committee, Appeal

18 FIFA Activity report 2014, p. 26 19 Article 28 of the FIFA Statutes, 2016 edition

Committee, Audit and Compliance Committee, Governance Committee), appointment of scrutineers, appointment of auditors, amendments of the statutes, vote for the host country of the FIFA World Cup and also approval of budget and different reports (audit report, financial report, activity report, etc.);  The FIFA Council and the Bureau of the Council – the FIFA Council the non-executive, supervisory and strategic body. The standing and ad-hoc committees are found to assist and advice the Council. When the FIFA reform is in process the FIFA Executive Committee still remains and passes decisions on all cases that do not come within the sphere of responsibility of the Congress or are not reserved for other bodies by law or under these Statutes20. For now, the structure of the FIFA Executive Committee is the following, there are now 24 members and the FIFA President of which: the President, 8 representatives from the UEFA, 4 representatives from AFC (Asian Football Confederation), 4 representatives from CAF (Confederation of African Football), 3 representatives from CONCACAF (Confederation of North, Central America and Caribbean Association Football), 3 representatives from CSF (South American Football Confederation or CONMEBOL) and for one representative from OFC (Australia, Oceania) female member (elected by the Congress).Bureau of the Council. There is also a Bureau of the Council which tries to solve some issues which are immediate between two meetings of the FIFA Council. The Bureau of the Council shall deal with all matters requiring immediate settlement between two meetings of the FIFA Council21. The Bureau consists of seven members: the FIFA President and six members from six Confederations appointed by the FIFA Council.  The general secretariat (including the position of the General Secretary) – the Secretary General is the chief executive officer (CEO) of FIFA. He chairs and heads the Management Board 22 . The Secretary General for exercising its duties should be recorded in the Commercial Register of the Canton of Zurich as having joint powers of signature (with one other person).  Standing and ad-hoc committees (including the remaining Executive Committee); The Committees’ structure is not very complicated anymore. There are nine different standing committees instead of 26 that were before. There is no need to describe the functions of the committees because their names explain the purposes they were created 23 (Governance Committee, Finance Committee, Development Committee, Organizing Committee for FIFA Competitions, Football Stakeholders Committee, Member Associations Committee, Players’ Status Committee, Referees Committee, Medical Committee);  The independent committees;  The independent auditors24.

20 Article 31 of the FIFA Statutes, 2015 edition 21 Article 38 of the FIFA Statutes, 2016 edition 22 Article 15 of the FIFA Governance Regulations 23 Article 39 of the FIFA Statutes, 2016 edition 24 Article 24 of the FIFA Statutes, 2016 edition

The Council, the President, the standing committees, the independent committees and the Secretary General are authorized to issue directives, guidelines, policies, procedures, circular letters, manuals and similar documents for the implementation of these FIFA Governance Regulations as part of their range of duties and powers, subject to the FIFA Statutes and the provisions of these regulations25. Article 21 of the FIFA statutes says that the Congress may grant the title of the honorary president, honorary vice-president and the honorary member26. The title allows to take place in the debate during the Congress but without voting rights. According to mentioned above, the last FIFA scandal and the global community demand for radical reforms the FIFA proposes its own way of reform. There are some positive and innovative amendments, but also ineffective issues which will keep the same order that leads to troubles and scandals. First of all the reform will be divided into four parts 27: Governance, Transparency, Accountability, Diversity. They say that the FIFA reform should make the association: modern, trusted and professional. What changed can be schematically showed as next: And after the reform the FIFA Council will be changed. But the changes are not radical, instead of 24 the number will increase up to 37 members of which28: - the FIFA President; - 8 vice-presidents (3 from UEFA and for one from AFC, CAF, CONCACAF, CSF, OFC); - 28 other members, which consist of: 6 representatives from the UEFA, 6 representatives from AFC, 6 representatives from CAF, 4 representatives from CONCACAF, 4 representatives from CSF, 2 representative from OFC. Every candidate will required to meet some particular criteria. An Independent FIFA Review Committee will be responsible for such eligibility check. But on the other hand Article 75 of the FIFA Statutes mentioned that the Executive Committee will automatically transformed into the Council and the members of Executive Committee will be first serving members of the Council for the remaining period of their previous positions in the Executive Committee. The new limitation for FIFA President, the FIFA Council and Members of independent committees will appear considering re-election. After the reform they can be elected for maximum of 3 times for four years period29. Additionally for the FIFA President, the FIFA Council and Secretary General – individual annual compensation disclosure. And in the next chapters there will be discussed the importance of transparency and disclosures. Separation of powers after the reform will be exercised in two ways: political decision making and business operations. The General secretariat will be transformed and new positions added besides the Secretary General the position of Chief Compliance Officer will be created. And new innovative operational issue will appear – the Secretary General have to report to the Council.

25 Article 2 of the FIFA Governance Regulations 26 Article 21 of the FIFA Statutes, April 2016 edition 27 http://www.fifa.com/governance/how-fifa-works/the-reform-process.html 28 Article 33 of the FIFA Statutes, April 2016 edition 29 http://www.fifa.com/governance/how-fifa-works/the-reform-process.html

The new body will be created – fully independent the Audit and Compliance Committee, which will follow the next issues: clear roles in decision-making, dispute resolution, independent audits, no conflicts of interest, zero tolerance for discrimination, no political interference, respect all regulations, representative democracy, religious and political neutrality, separation of powers, integrity of the game. Taking into account the importance of stakeholders in modern football organizations the reform proposes to create a new Football Stakeholder Committee which should be made of: Clubs, Players, Coaches, Leagues and Referees. And again this proposition creates more questions than answers: who will represent clubs, players, coaches, leagues and referees? What will be the selection criteria? How many members will form this committee? What power will get this committee? Just to compare the last amendments to the FIFA statutes. Let’s take the FIFA Statutes 2015 edition and FIFA statutes 2016 editions and expose new changes. First of all it is observed the limitation of re-election of the FIFA President – the most important and waited amendment. About this innovational option will be mentioned in details in the chapters 6.1 and 7.2 of this work. From now there will be no requirements about woman on a board anymore, which was actually controversial issue, because all board members should respond the professional requirements, but not always just a gender requirement can be competitive. Transformation from the FIFA Executive Committee to FIFA Council looks more like cosmetic change and not radical( the FIFA Executive Committee was made of 25 members – now the transformed new body the FIFA Council counts 37 members and the sources of forming are the same, the proportions a little bit changed and reduced one member of women representative). Reduced number of committees from 26 to 9. The position of Chief Compliance Officer will be created – the person who should have as an essential function in a company an overseeing and managing regulatory compliance issues. FIFA has also other bodies helping to fulfill its important mission. F-MARC aims to protect players’ health, prevent injury and maximize the health benefits of the game; the Dispute Resolution Chamber (DRC) is FIFA's body that provides arbitration and dispute resolution on the basis of equal representation of players and clubs and an independent chairman, and 12 FIFA Development Officers have been issued the task of working with Member Associations in identifying and implementing future projects within their respective regions30. It is clear that FIFA is transforming from the organizations corporate governance of which was built on basis of its product – the football, to the organization with the highest standards of corporate culture and transparency in decision making. The UEFA structure has a four levels constitution as can be observed in Figure 1 and can be schematically structured as next:  First level – the UEFA Congress (consists of 55 member associations) and external auditors that are working in parallel31;

30 http://www.fifa.com/about-fifa/committees/index.html 31 Article 46 of the UEFA statutes, 2016 edition

 Second level – Organs for the Administration of Justice (also additionally Court of Arbitration for Sport in Lausanne (CAS) – is working in parallel – according to Article 46 of the UEFA statutes), the Executive Committee, the UEFA President, the UEFA Governance and compliance auditors (Article 45 of the UEFA statutes)32;  Third level – Subsidiaries (as created by the Executive Committee in order to achieve the UEFA objectives defined in article 2 of the UEFA statutes) + Professional Football Strategy Council + General Secretary/Administration + Committees + Expert Panels;  Fourth level: Match Officers and Instructors. Figure 133

The UEFA Congress has two formats of performance: ordinary and extraordinary meetings. The Ordinary Congress is organized once a year and involves representatives of all the UEFA’s member national associations. Now its number reached to 55. The issues of the Ordinary Congress are: approval of budget and different reports (the report of the President and Executive Committee, financial report, auditors’ report), elections (of the UEFA President, of the Executive Committee members, of the European members of the FIFA Executive Committee), amendments (to the statute and regulations) and issues considered with membership (acceptance, suspension and exclusion of a member association. An Extraordinary Congress may be convened by the UEFA Executive Committee, or at the written request of one fifth or more of the UEFA member associations, stating the items to be placed on the agenda34. External auditors are responsible for the independent report and are elected/re-elected every year on the Ordinary Congress.

32 Article 45 of the UEFA statutes, 2016 edition 33 Official web site of UEFA - http://www.uefa.org/about-uefa/index.html 34 http://www.uefa.org/about-uefa/organisation/congress/index.html

The UEFA executive committee is a supreme executive body and manages UEFA. It consists of the Chairman – the UEFA President and fifteen members. The members are elected by the UEFA congress. The UEFA Executive Committee takes place every two months. The Emergency Panel is a body that is responsible for executing final decisions on fixed- term issues that should be done by the UEFA Executive Committee between the meetings of the last. The Emergency Panel consists of five members UEFA President; the first UEFA vice-president; the UEFA vice-president chairing the Finance Committee, and two other members of the UEFA Executive Committee appointed by the UEFA President on a case-by-case basis35. The UEFA’s President main function is to represent the UEFA and to be a chairman of the UEFA Congress and UEFA Executive Committee. In case of equal voting the President’s vote has dominant value. These responsibilities he is carrying for four years and can be re-elected unlimited times. The election of the UEFA President is held during the Congress. Also the UEFA President is responsible for the relations between UEFA and its Member Associations, FIFA, other confederations, political bodies and international organizations. For example the last three UEFA Presidents Jacques Georges (1983-1990), Lennart Johansson (1990-2007) and Michel Platini (2007-2015) held together the UEFA President office for 32 years. Those organs are mostly disciplinary. They are: the Control, Ethics and Disciplinary Body and the Appeals Body; Ethics and Disciplinary Inspectors and the two-chamber Club Financial Control Body (CFCB). The Ethics and Disciplinary Body have the main function to open a disciplinary investigation. The Appeals Body is empowered to revise based on the Disciplinary Regulations the decisions of the Control, Ethics and Disciplinary Body. There is also possibility for disciplinary inspectors to manage investigations solely or cooperate with other non-UEFA bodies. If the disputes between UEFA and other entities like associations, leagues, clubs, and players occurs, it should be considered by the Court of Arbitration for Sport in Lausanne, Switzerland. This Council deals with improving collaboration between the various stakeholders in European football. The Council has 16 members delegated from 4 sources, for 4 members from each. The Council is made of four UEFA vice-presidents on behalf of the interests of UEFA's member associations as well as the general interests of UEFA as European football governing body; then, twelve representatives for a two-year term from three groups recognized by UEFA as representing the interests of the European professional football leagues, of the clubs participating in the UEFA competitions, of professional players in Europe (for example the Association of European Professional Football Leagues (EPFL), the European Club Association (ECA), FIFPro Division Europe). Committees and Panels cover a variety of issues in European football the UEFA is involved. There are nineteen committees and six expert panels. The spheres they are operating differentiate for medical matters, players’ status, and players’ transfers, refereeing and finance, as well as submission of advices, proposals and recommendations to the UEFA Executive Committee. Mostly the committees and expert panels have an advisory function.

35 Article 4 of the UEFA Organizational Regulations, edition 2014

Honorary President and honorary members are persons who deserved a special treatment from the UEFA for their activities in the past. The honorary president has the capacity to advice but without right to vote during the UEFA Congress and UEFA Executive Committee meetings. Honorary members have the same capacity but only during the UEFA Executive Committee meetings. The UEFA Administration is responsible for the business and administrative issues. It is situated at headquarters in the House of European Football in Nyon. The administration has its own chairman – the UEFA General Secretary who is responsible for its organization, management and direction. The procedure of appointment of the UEFA General Secretary is the next: the UEFA President proposes the candidate to the UEFA Executive Committee and if the Committee agrees the candidate is appointed. The General Secretary holds his position on a permanent basis. He is also empowered to appoint Directors who shall be employed by UEFA36. Structures of FIFA, UEFA, International Olympic Committee and Council of Europe comparison. It’s difficult to understand for the first look whether structure of the FIFA and UEFA is enough good and progressive. Everything can be better understood and appreciated in comparison. The same issue with the FIFA and UEFA structure. Comparing with International Olympic Committee (hereinafter – IOC) and Council of Europe maybe both FIFA and UEFA can borrow some good principles of building transparent and sustainable entity. Let’s have a look on the corporate structure of the International Olympic Committee – the Supreme Authority of the Olympic movement. The structure is the following: - The President of International Olympic Committee – represents the organization; - Executive Board – was created in 1921, the Executive Board is the executive organ of the IOC. The Executive Board sees to the management of IOC issues and ensures respect for the Olympic Charter. It is the only body competent to propose Charter modifications to the Session, submit names of persons it recommends for election and appoint the IOC Director General37; - Administration – responsible for collaboration between all members of the Olympic Family, from the National Olympic Committees, the International Sports Federations, the athletes, the Organizing Committees for the Olympic Games, to the TOP partners, broadcast partners and agencies from the United Nations. At least they can borrow the procedure of election of the President of International Olympic Committee which elects during the Session, by secret ballot, a President from among its members for a term of eight years renewable once for four years38. It is very obvious that the Council of Europe is a different organization from FIFA and UEFA, but at the same time they have a lot in common. The structure of the Council of Europe is the next39: the committee of Ministers and the Parliamentary assembly (before 1994 it was called the Consultative Assembly).

36 Article 41 of the UEFA Statutes, 2016 edition 37 https://www.olympic.org/about-ioc-institution 38 Article 20 of the Olympic Charter, August 2015 edition 39 http://www.coe.int/en/web/about-us/structure

The Secretariat of the Council of Europe is serving both above mentioned organs40. In detail the structure of the Council of Europe and its functions are very progressive. Secretary General – the head of the organization. The main function is to represent the Council of Europe and responsible for the strategic management of the Organization. The General Secretary is elected for a five year term on the Parliamentary Assembly meeting. Deputy Secretary General – divides with the Secretary General his duties. Committee of Ministers – one of two the most important bodies of the Council. The policy of the Council of Europe is managed by the Committee of Ministers. From the financial perspective the Committee approves the budget of the Council of Europe and programme of activities. Committee of Ministers consists of every member state which are represented through their ministers of foreign affairs or other permanent diplomatic representatives. Parliamentary Assembly (PACE) – the second one of two the most important bodies of the Council. The Parliamentary Assembly consists of 318 members of parliament from the 47 member states. The Assembly elects the Secretary General, the Human Rights Commissioner and the judges to the European Court of Human Rights. It provides a democratic forum for debate and monitors elections. Its committees play an important role in examining current issues. Congress of Local and Regional Authorities - the Congress of Local and Regional Authorities is responsible for strengthening local and regional democracy. It comprises 636 elected representatives representing more than 200 000 local and regional authorities. European Court of Human Rights - this is the permanent judicial body which guarantees for all Europeans the rights safeguarded by the European Convention on Human Rights. It is open to states and individuals regardless of nationality. The 47 member states of the Council of Europe are parties to the Convention. Commissioner for Human Rights - The Human Rights Commissioner independently addresses and brings attention to human rights violations. Conference of INGOs - The Conference includes some 400 international Non- Governmental Organizations (INGOs). It provides vital links between politicians and the public and brings the voice of civil society to the Council. The Council's work benefits extensively from the INGOs' expertise and their outreach to European citizens. So from the International Olympic Committee and the Council of Europe the FIFA and UEFA can borrow the next: Influence of the parliament, in this case Congress of FIFA and UEFA; Transparency in structure and policy; Professional performance of their events. The best example of transparency is to visit the official web site of these organizations. On the official web sites of Council of Europe41 and the International Olympic Committee42 there is all essential information about the structure and the functions of all the main bodies.

40 Article 10 of the Statute of the Council of Europe 41 http://www.coe.int/en/web/portal/organisation-and-mandates-of-the-secretariat 42 https://www.olympic.org/about-ioc-institution

3rd chapter Features and characteristics of FIFA and UEFA as nonprofit organizations In this chapter the following will be described: the overlook of the Swiss legislation about non-profit organization. Which forms are allowed, which forms they chose, which forms are better to choose for sport organization. Also the example and comparison of worlds well known and influential non-profitable non-governmental charity organizations. Both organizations are non-governmental associations and are registered under Art. 60 of Swiss Civil Code. Let’s start with the definition of the association. The association is a corporately organized group of persons that pursues a basically ideal (non‐economic) purpose and has a legal personality43. The Swiss law requires association to have two organs: the general meeting - the UEFA Congress as the supreme governing body (Art. 64 Swiss Civil Code) and the association’s committee – the UEFA Executive Committee (Art. 69 Swiss Civil Code)44. The Swiss law allows associations to have an additional or different organs instead of the general meeting if articles of association mention this, such as a secretary or a delegates’ meeting. Purpose of the association Pursuant to art. 60 paragraph 1 Swiss Civil Code, the purpose of an association may be political, religious, scientific, cultural, charitable, social or of other non‐ economic nature. Associations of persons pursuing a commercial purpose are subject to the company law defined in the Code of Obligations45. The decisive question is how a commercial purpose is defined46. It is essential that an association does not primarily strive for monetary and financial benefits for its members. The ideal purpose always has to remain the main focus even if the association runs a commercial business. The difference between a commercial and a non‐ commercial purpose is not based on whether the association of persons operates a business or not47. If an association operates a commercial business and achieves a gross revenue of at least CHF 100.000 per year (annual revenue), it is obligated to be entered into the commercial register48. If an association does not operate a commercial business, it is eligible for entry in the commercial register; in such case the entry is only a declaration but results in the association’s publication and makes it subject to debt enforcement by bankruptcy or debt recovery from bill of exchanges. An association that is under a duty of audits must also be entered into the commercial register49.

43 Hausheer/Aebi‐Muller 2008, p. 326 44 Dominique Jakob, Roman Huber and Katharina Rauber. “Nonprofit Law in Switzerland.” Working Papers of the Johns Hopkins Comparative Nonprofit Sector Project, No. 47. Baltimore: The Johns Hopkins Center for Civil Society Studies, 2009, p. 6. 45 Art. 59 para. 2 Swiss Civil Code 46 Portmann, W.: The Swiss Law on Associations, 2005, p. 11 47 Rulings of the Swiss Federal Court 88 II 209 et seqq., 219 48 Art. 61 para. 2 no. 1 Swiss Civil Code, art. 36 para. 1 Commercial Register Ordinance of 17 October 2007 49 Art. 61 para. 2 no. 2 Swiss Civil Code, see below IV. a. 3.2 Association Audit

Non-profit organizations have a somewhat deceiving title. Organizations designated as non-profit receive various tax benefits from their respective domestic governments, as by definition they are required to immediately reinvest any potential profits into the organization’s designated activities. However, it’s important to make the distinction between non-profit and poor. Despite not holding onto and distributing any profits from organizational activities50, NPO’s can still be absurdly rich. High ranking members in these organizations can still take home very nice salaries and the bank accounts for these NPO’s can easily be in the 7 figures. Some of these names you’ve probably never encountered before while others you’re probably very familiar with, but the one thing they all have in common is a seriously stacked company account. The FIFA as well as UEFA are non-profit organizations. First of all it means – they do not pay taxes. But both of them are not-like most of the nonprofit organizations. They are not charity organizations and they do not exist for donations. For example top ten the wealthiest nonprofit organizations in the world are charity organizations and the sources of their financial performance are usually donations and government support. And they are51: YMCA, Goodwill Industries International, Catholic Charities, United Way, American Red Cross, Salvation Army, Habitat for humanity International, Boys and Girls Club of America, Easter Seals and Smithsonian Institute. YMCA – Young Men’s Christian Association52 is the most powerful and well recognized non-profit organization in the world with an annual budget of approximately USD 6 billion. The organization has become famous because it has been providing services to communities all over the world for over 170 years. The organization promotes Christian values to young boys through various community programs. The headquarters of organization in Geneva, Switzerland, and operate centers in North America, Europe and Africa. The opportunities they offer vary greatly from location to location. Mostly it is focused on sports, youth engagement, training services, immigrant services, and many other. Goodwill Industries International53 with annual budget USD 4.5 billion manage to help individuals with disabilities and members of their families. The Catholic Charities54 – annual budget USD 4.4 billion, their mission is to reduce poverty in America. They have the capacity to help over 9 million people every year. The United Way – annual budget of USD 4.1 billion they doesn't have very particular aim. But they are operating in thousands of their branches and help people that depends on a situation. American Red Cross55 – with an annual budget of almost USD 3.5 billion is extremely well known. One of the most old charity organizations in the world founded in 1881 as first assistance for domestic humanitarian help. At the beginning it was a help in the event of catastrophe within the United States, but with time the organization has expanded into many other similar programs

50 Dominique Jakob, Roman Huber and Katharina Rauber. “Nonprofit Law in Switzerland.” Working Papers of the Johns Hopkins Comparative Nonprofit Sector Project, No. 47. Baltimore: The Johns Hopkins Center for Civil Society Studies, 2009, p. 6 51 http://www.therichest.com/business/companies-business/the-10-richest-non-profit-organizations-on-earth/ 52 http://www.ymca.int/ 53 http://www.goodwill.org/ 54 https://catholiccharitiesusa.org/ 55 http://www.redcross.org/what-we-do

17 and now it responds to approximately 70000 disasters in the United States. Today they are involved in health and safety services, collection and distribution of blood provided by donors, community services for poor people, disaster reliefs, supporting America’s military families, educational programs, and an enhanced international presence. The budget of the organization is formed mostly by private donations and reaches almost to $3.5 billion. The organizations is ready to help whenever the national disaster happens56. On the contrary from the UEFA financial report is seen that commercial subsidiaries exist57 for many years without any reasonable purpose (for instance Euro 2008 SA still exists and is still on the balance sheet although the tournament UEFA EURO 2008 for almost eight years in a history). Although these are not financial transactions, UEFA shows value-in-kind benefits from commercial contracts (e.g. sportswear, technical equipment, beverages and transport) in the income statement under commercial rights revenue, and value-in-kind expenses under other event expenses58. The Salvation Army59 – annual budget USD 3.2 billion – the main activity is to run the shelters for homeless. The Habitat for humanity International 60 with annual budget of approximately USD 1.5 billion this organization helps to build houses from the ground up only with volunteering labor and sell it to poor people for the price only to cover materials expenses. They build houses after natural disasters (hurricanes or earthquakes). Boys and Girls Club of America61 with annual budget USD 1.4 billion, the main issue for this organization is to organize after-school programs for youth – especially for those who are from lower-class neighborhoods who doesn’t have much possibilities to be involved in extra-curricular activities. Easter Seals62 with annual budget of USD 1.402.531.662 – This organization specifies on assistance to people with special needs, especially autism. Smithsonian Institute63 with annual budget USD 1.2 billion – the main task is preserve and spread the knowledge to the general public. The pace and direction of today’s world is overwhelmingly dictated by the decisions and actions of large organizations. In our recent past, power was consolidated amongst a very small group of people, sometimes single individuals such as monarchs and dictators. Of course, this is still the case in various parts of the world, but for the most part we’ve moved past it. The real power is held – for the most part – by governments and corporations64.

56 http://www.redcross.org/what-we-do 57 Dominique Jakob, Roman Huber and Katharina Rauber. “Nonprofit Law in Switzerland.” Working Papers of the Johns Hopkins Comparative Nonprofit Sector Project, No. 47. Baltimore: The Johns Hopkins Center for Civil Society Studies, 2009, p. 7 58 UEFA Financial report 2014/2015, 25 February 2016 edition p.10 59 http://www.salvationarmy.org/ 60 http://www.habitat.org/ 61 http://www.bgca.org/Pages/index.aspx 62 http://www.easterseals.com/?referrer=https://www.google.nl/ 63 http://www.si.edu/ 64 http://www.therichest.com/business/companies-business/the-10-richest-non-profit-organizations-on- earth/?view=all

Governments have legal and political control over their respective populations, which is the most direct kind of control. On the other hand, the kind of power that corporations wield is a little bit trickier to pin down and accurately identify. They influence governments through lobbying and influence the public through mass advertising and other mechanisms. Most people looking to make any meaningful change in the world will use either government or the corporate world as their avenue – but there is another way. Those companies show us how really the nonprofit organizations should help ordinary people all the time if they don’t want to pay taxes. Considering all the facts it can be observed that FIFA and UEFA are associations under Swiss law, according Article 60 of the Swiss Civil Code they chose the form of association, they are non-governmental, registered in the commercial register, because they because they operate a commercial business and achieves a gross revenue of at least CHF 100.000 per year65 (annual revenue), political neutral, have no charity in their activities and they establish commercial organizations for better financial result.

65 Dominique Jakob, Roman Huber and Katharina Rauber. “Nonprofit Law in Switzerland.” Working Papers of the Johns Hopkins Comparative Nonprofit Sector Project, No. 47. Baltimore: The Johns Hopkins Center for Civil Society Studies, 2009, p. 6

4th chapter Financial performance of FIFA and UEFA In this chapter will be explained about the following: how the FIFA and UEFA who are nonprofit organizations get revenues estimated few billion of US dollars or Euros. The main source of income is broadcasting66, marketing and commercial rights. Financial performance of FIFA for several years is very controversial, because for the last year FIFA got USD 1.152 billion in revenues, but the expenditure increased by USD 240 million to USD 1.274 billion. First time for many years that FIFA ended the year with a negative annual result of USD 122 million67.For example for the last five years the balance was always positive: in 2011 USD 36 million, in 2012 USD 89 Million, in 2013 USD 72 million, in 2014 USD 141 million. Let’s have a look on a last 2015 financial year performance. The total revenue counted USD 1.152 billion which is 100%. There were three sources of income: event-related revenue (85%) with USD 973 million, finance income (8%) of USD 98 million and other operating income (7%) of USD 81 million68. The biggest amount of the revenue was event-related: TV broadcasting rights USD 629 million (consist of: 2018 FIFA World Cup USD 613 million and Other FIFA events USD 16 million), marketing rights USD 257 million (consist of: 2018 FIFA World Cup USD 246 million and Other FIFA events USD 11 million), hospitality rights USD 35 million, licensing rights USD 12 million and other revenues USD 40 million. The total expenses for the last 2015 financial year counted USD 1.274 billion. The expenditures of FIFA were as follows: Event-related expenses (61%) of USD 781 million (consist of: 2018 FIFA World Cup USD 574 million, FIFA Club Protection Programme USD 29 million, Other FIFA events USD 178 million), Other operating expenses (15%) of USD 190 million (consist of: Personnel USD 92 million, Communications USD 26 million, Buildings and maintenance USD 20 million, Taxes and duties USD 4 million, Depreciation and amortization USD 14 million, Other (e.g. IT, travel, logistics, reception) USD 34 million), Development-related expenses (13%) of USD 161 million (consist of: Financial Assistance Programme (FAP) – member associations USD 54 million, Goal Programme USD 27 million, Financial Assistance Programme (FAP) and development programmes – confederations USD 33 million, Technical development programmes USD 10 million, Refereeing Assistance Programme (RAP) USD 9 million, Women’s football USD 7 million, Other (e.g. education, medicine and science, solidarity projects) USD 21 million, Football Governance (7%) of USD 95 million (consist of: Committees and Congresses USD 33 million, Legal matters USD 62 million), Financial expenses (2%) of USD 30 million (consist of: Foreign currency loss USD 28 million, Interest expenses USD 2 million), Exploitation of rights (2%) of USD 17 million (consist of: Broadcasting and media rights USD 11 million, marketing USD 4 million, and Licensing

66 UEFA EURO 2016 France Press Kit 67 FIFA Financial and Governance report 2015, p. 14 68 FIFA Financial and Governance report 2015, p. 18

USD 2 million). The reasons of such poor performance can be different, starting with the not a grand performance and coming to the scandals about transparency in decision-making. And now let’s have a look on a financial performance of UEFA. The UEFA is an international non-governmental, not-for-profit organization in the form of an association according to Swiss law and is domiciled in Nyon, Switzerland69. The UEFA financial year starts on 1 of July and ends on 30 June of the following year.70 This can be explained by the main product of the UEFA – the football. For the previous 2014/2015 financial year UEFA had next results: Revenues and income by nature euro 2.12 billion, which consist of: Broadcasting rights (79.5 %) of euro 1 689.6 million; Commercial rights (16.3%) of euro 345.5 million; Tickets and hospitality (1.7%) of euro 37 million; Other revenue (1.3%) of euro 27.3 million; So total revenue counted euro 2 099.4 million plus Asset management of 1.2% which is euro 24.9 million. Expenses of euro 1.976 billion, which consist of: distribution to participating teams euro 1.570 billion, contributions to associations euro 44.6 million, event expenses euro 141.4 million, referees and match officers euro 35.7 million, information and communications technology euro 52.5 million, employee salaries and benefits euro 72.8 million, depreciation and amortization euro 11.2 million, other expenses euro 48 million. Positive balance sheet – approximately euro 144 million. Over the last four years, UEFA generated on average more than €2 billion in revenue every year71. Source of income is divided into two ways: first source – income by nature as well as by competition, second source – other income. Although UEFA is non-for-profit non-governmental organization for its commercial purposes it establishes commercial entities. For example UEFA established a subsidiary for UEFA Euro 2016 with name EURO 2016 SAS. Besides this, there are other subsidiaries. There is also a service company UEFA Events SA – fully consolidated with share capital of 4 million Swiss francs. UEFA, which holds all the competition rights, and the French Football Federation have set up a company, EURO 2016 SAS, to which they have delegated responsibility for the operational organization of the tournament under a single directorate72. EURO 2016 SAS is a company under French law, with the legal form of a simplified joint stock company, owned 95% by UEFA and 5% by the French Football Federation. From the UEFA financial report flows that Euro 2008 SA (Dormant company)73 still exists and is still on the balance sheet although the tournament UEFA EURO 2008 for almost eight years in a history. Although these are not financial transactions, UEFA shows value-in-kind benefits from commercial contracts (e.g. sportswear, technical equipment, beverages and transport) in the

69 UEFA Financial report 2014/2015, 25 February 2016 edition 70 Article 44 of the UEFA Statutes 2016. 71 UEFA Financial report 2014/2015, 25 February 2016 edition 72 UEFA EURO 2016 France Press Kit 73 UEFA Financial report 2014/2015, 25 February 2016 edition

21 income statement under commercial rights revenue, and value-in-kind expenses under other event expenses74. According to the UEFA Financial report 2014/2015 the accounting principles of the UEFA are the next75: to deal with all questions relating to European football, to promote football in Europe in a spirit of peace, understanding and fair play, without any discrimination on account of politics, gender, religion, race or any other reason, to monitor and control the development of every type of football in Europe, to organize and conduct international football competitions and tournaments at European level for every type of football whilst respecting the players’ health, prevent all methods or practices which might jeopardize the regularity of matches or competitions or give rise to the abuse of football, ensure that sporting values always prevail over commercial interests, redistribute revenue generated by football in accordance with the principle of solidarity and to support reinvestment in favor of all levels and areas of football, especially the grassroots of the game. The slow and evolutionary nature that has characterized the game has no doubt been instrumental in football’s growth and success, yet as the world changes, football changes with it. For the guardians of association football, the challenge at the beginning of the twenty-first century will be to marry the modernizing imperatives with the traditions that have guided football to its unchallenged position as the world’s dominant sport. Nowhere can those challenges be greater than on the continent of Europe, where football and economics have increasingly clashed76.

74 UEFA Financial report 2014/2015, 25 February 2016 edition p.10 75 UEFA Financial report 2014/2015, 25 February 2016 edition, p. 6 76 Matthew Holt: UEFA, Governance, and the Control of Club Competition in European Football, 2009, p. 21

5th chapter 5.1 Role of stakeholders, In this chapter will be explain in detail about the following: who are the main stakeholders and what is their role in the activity of FIFA and UEFA. How the main stakeholders like sponsors and partners influence FIFA and UEFA. And what is the role of partners and sponsors and how the FIFA and UEFA structure them. Analysis of the governance structure of UEFA and the governance of European football needs to consider a number of things. These include the role and influence of stakeholders and their integration into the current organizational framework; an understanding of how governance and the integration of stakeholders relates to the sustainability of the European model of sport, and its key aspects; and the importance of the management of change77. The political debate on sport in Europe often attributes considerable importance to the so-called "European Sport Model". The Commission considers that certain values and traditions of European sport should be promoted. In view of the diversity and complexities of European sport structures it considers, however, that it is unrealistic to try to define a unified model of organization of sport in Europe. Moreover, financial and social developments that are common to the mostly of the Member States (commerce, challenges to public wasting, increasing numbers of participants and stagnation in the number of voluntary workers) have resulted in new challenges for the organization of sport all over the world. The emergence of new stakeholders (participants outside the organized disciplines, professional sports clubs, etc.) is posing new questions as regards management, democracy and representation of interests within the sport movement. The Commission can play a role in encouraging the sharing of best practice in sport governance. It can also help to develop a common set of principles for good governance in sport, such as transparency, democracy, accountability and representation of stakeholders (associations, federations, players, clubs, leagues, supporters, etc.). While doing so the Commission will draw on previous work78. Attention should also be paid to the representation of women in management and leadership positions. The Commission acknowledges the autonomy of sporting organizations and representative structures (such as leagues). Furthermore, it recognizes that governance is mainly the responsibility of sports governing bodies and, to some extent, the Member States and social partners. Nonetheless, dialogue with sports organizations has brought a number of areas to the Commission’s attention, which are addressed below. The Commission considers that most challenges can be addressed through self-regulation respectful of good governance principles, provided that EU law is respected, and is ready to play a facilitating role or take action if necessary.

77 Matthew Holt: UEFA, Governance, and the Control of Club Competition in European Football, 2009, p. 15 78 E.g. the "Rules of the Game" conference organized in 2001 by FIA and the EOC and the Independent European Sport Review carried out in 2006.

The governance of the global football operates in a multi-layered, and multi-organizational environment. FIFA’s relationship within the structures of football is complex enough before one begins to consider the development of institutions and organizations operating outside the football framework 79 . The main stakeholders of FIFA are: 209 Member associations, 6 confederations (including UEFA), sponsors, partners, media, broadcasters and supporters80. The main stakeholders of FIFA are 209 worldwide national associations. Also important role play six confederations recognized by FIFA: UEFA, AFC (Asian Football Confederation), CAF (Confederation of African Football), CONCACAF (Confederation of North, Central America and Caribbean Association Football), CSF (South American Football Confederation or CONMEBOL), OFC (Oceania Football Confederation)81. Very important and interesting fact that UEFA is a stakeholder of FIFA and FIFA is a stakeholder of UEFA. UEFA is a stakeholder of FIFA as one of the six confederations that are involved in its difficult structure. On another hand UEFA is a Confederation recognized by FIFA. The changing nature of governance in sport has meant that UEFA must negotiate a complex network of stakeholder interest82. It can be better observed through the Figure 2 how the UEFA stakeholders are located, how they cooperate and how they organized. The main stakeholders of UEFA are: 55 member associations, the FIFA, National leagues, sponsors, clubs, players, supporters, broadcasters, European Union, National Governments and Local governments. Figure 2

79 Matthew Holt: UEFA, Governance, and the Control of Club Competition in European Football, 2009, p. 19 80 http://www.fifa.com/about-fifa/marketing/sponsorship/index.html#2521103 81 http://www.uefa.org/stakeholders/index.html (last visited on June, 1, 20016) 82 Matthew Holt: UEFA, Governance, and the Control of Club Competition in European Football, 2009, p. 21

The special issue for every new President of FIFA or UEFA is to improve the role of small/minority stakeholders and to prove their importance for the organization. But still now the rights of small stakeholders are not fulfilled according to the values and principles of these respectful organizations. The FIFA and the UEFA have numbers of stakeholders which form a structure of the organizations, bring revenues and influence on their policy. The essential purpose to compare the FIFA and UEFA with other commercial and profitable organizations in which the main stakeholders are the main shareholders at the same time. But taking into consideration that mostly the stakeholders are not the shareholders of both associations it would be useful to determine the difference between the shareholders and the stakeholders. Stakeholders could be employees who, without the company, would not have jobs, bondholders who would like a solid performance from the company and, therefore, a reduced risk of default, customers who may rely on the company to provide a particular good or service, and suppliers who may rely on the company to provide a consistent revenue stream83. The new field of corporate social responsibility (CSR) has encouraged companies to take the interests of all stakeholders into consideration during their decision-making processes instead of making choices based solely upon the interests of shareholders. The general public is one such stakeholder now considered under CSR governance. When a company carries out operations that could increase pollution or take away a green space within a community, for example, the general public is affected. Such decisions may be right for increasing shareholder profits, but stakeholders could be impacted negatively. Therefore, CSR creates a climate for corporations to make choices that protect social welfare, often using methods that reach far beyond legal and regulatory requirements. On the official web site of the UEFA mentioned that UEFA recognizes fans as important stakeholders in European football84. Also UEFA recognizes as stakeholders: Professional Football Strategy Council (consists of four UEFA vice-presidents and other representatives of the organizations recognized by UEFA), clubs, leagues, players’ unions, supporters, European Union, Team sports. First of all let’s start with UEFA Professional Football Council (PFSC). The main function of this Council is to improve collaboration between the various stakeholders in European football. The stakeholders of European football like UEFA and groups representing of interests of leagues, clubs, players, supporters, which are organized in accordance with UEFA’s statutes, regulations and values as well as constituted in a democratic, open and transparent matter85. The PFSC can strengthen its power and influence through the possibility of establishing a European Professional Football Charter. The PFSC has variety of functions that are considered to European football stakeholders. It takes care about the issues of social dialogue in European professional football matters,

83 http://www.investopedia.com/ask/answers/08/difference-between-a-shareholder-and-a-stakeholder.asp 84 http://www.uefa.org/stakeholders/index.html 85 Article 3bis of the UEFA statutes 2016.

25 cooperates with the existing professional football consultative bodies, keeps the conditions of comfortable living of the professional and amateur football together, discusses and then transfers to the UEFA Executive Committee the propositions of the players, clubs, leagues, UEFA member associations. Actually the PFSC helps UEFA to keep closely in touch with the football stakeholders. But nor the FIFA neither UEFA do not mention about their sponsors contracts and other partners. FIFA has, for example, the partners and sponsors: Wanda Group, Gazprom, Adidas, Hyundai, Kia, Coca-Cola, and Visa. The UEFA Champions League has official partners: Ford, UniCredit, MasterCard, Sony and Sony PlayStation, Adidas, Heineken. They also do not disclose the terms and conditions of sponsor agreements. 5.2 How the main stakeholders influence on FIFA and UEFA Comparing to charity organizations associations are more independent from big stakeholders. They have variety of stakeholders and they have sophisticated structure. On the contrary as it was mentioned above that charity organizations from the United States have difficulties of being independent in their police from their big stakeholders like donors, sponsors or government. The FIFA and UEFA sponsors or partners do not have so big influence probably because of the diversification of revenues. To some degree, a founding donor can more easily control a charitable trust than a nonprofit corporation. A living donor can be the sole trustee, whereas the most states require a nonprofit corporation to have at least three directors. While a donor could set the charity as a membership corporation with herself as the sole member, even directors elected by members must exercise independent judgement under their duty of. The sole-corporate-member structure became common with the restructuring of non-profit hospital system86. Currently, the self-governed hierarchic networks that traditionally constitute the sports world are increasingly facing attempts by governments – mostly due to the commercialization of sport- and increasingly empowered stakeholder organizations to interfere in their policy processes87. Sponsors play a huge role in FIFA life. The biggest part of revenues comes from the FIFA sponsor agreements. For example FIFA had designed a three-tier sponsorship structure that will be implemented for the next two FIFA World Cup88. The Structure is next: - The highest level – FIFA Partners – playing wider role in supporting the development of football all around the world, from grassroots right up to the top level at the FIFA World Cup; - Middle level – FIFA World Cup Sponsors - have rights to the FIFA Confederations Cup and the FIFA World Cup on a global basis. Sponsors at this level enjoy a strong brand

86 The nonprofit sector: a research handbook / edited by Walter W. Powell and Richard Steiberg. – 2nd ed., p. 249 87 Bruyninckx, 2012; Geeraert et al, 2012 88 http://www.fifa.com/about-fifa/marketing/sponsorship/index.html#2521103

association with these two global tournaments, the use of selected marketing assets and media exposure, as well as ticketing and hospitality offers for the events; - Lower level – the Regional Supporter – allows companies within the pre-defined global regions to promote an association with the FIFA World Cup in the domestic market. The new FIFA President started his post in February, 2016 and in March 2016 he had already signed a partnership agreement with Chinese company named Wanda Group with granting it the highest level of sponsorship rights for the next FIFA World Cup editions89. Only time can explain us whether such big sponsorship agreements influence the decision-making policy of FIFA. The evidence of such influence can be for example one of the next four FIFA World Cup hosted in China. Of course, stakeholders do not just utilize the opportunities to apply pressure offered by UEFA. A complex network of governance exists in which stakeholders in European football increasingly interact with one another as well as with the established authorities. Whilst we can see how stakeholders are integrated into procedures of UEFA, the reality of the environment in which UEFA operates is an increasing dense and convoluted network of groups, individuals and interests, characterized by alliances that seek to shape the direction of football governance in specific self-interested directions. This potential for new alliances between organizations, sponsors, the media, and political institutions has destabilized the governance framework of European football90. Also should be mentioned about influence FIFA and UEFA on the performance of their stakeholders. For example, one of the most important stakeholders of the UEFA its partner and sponsor – Heineken the most brightly shows the impact 91 . The beer market fluctuations determined that consumption of the product increased during each UEFA Champions League game, as its advertising reached around 47 million UEFA Champions League fans. Purchase consideration is approximately almost twice higher than average on the market (beer sector) during the periods of the football matches where Heineken is a sponsor. And the last but not the least – other sport organizations. They can be UEFA and FIFA competitors. Because if they do not develop and improve the product they operate they will lose their customers. The Olympic Games can compete with football as a game and show a greater performance for global community. For example video reply is available on the hockey matches, tennis. There are always many scandals when one of the party is not satisfied with the final result but video reply is not allowed. UEFA is actively cooperating with other sport stakeholders. For example Statement of the European Team Sport (FIBA Europe, UEFA, EHF – European Handball Federation, IIHF –

89 http://www.fifa.com/about-fifa/news/y=2016/m=3/news=wanda-group-becomes-new-fifa-partner- 2771032.html 90 Matthew Holt: UEFA, Governance, and the Control of Club Competition in European Football, 2009, p. 18 91 http://www.forbes.com/sites/brandindex/2014/06/03/uefa-sponsor-heineken-scores-high-in-champions- league-games/#62756676e2c6

International Ice Hockey Federation, FIRA – Association Europeenne de Rugby, CEV – Confederation Europeenne de Volleyball) about protection of fair and open competition92.

92 Statement of the European team sports: EU White Paper on sport: Much work remains to be done, 2007

6th chapter 6.1 New challenges for FIFA and UEFA In this chapter will be exposed the threats that the associations are facing during several years and can possibly affect them. Lack of transparency as the main factor that disturbs global community. If the FIFA and UEFA won’t change the structure, eliminate unimportant rules (for example re-election option) and issues (like honorary president) – their competitors can outfoot them. Especially those who have transparent structure and don’t have any scandals for a long period of time. The International Olympic Committee is the best example of properly structured and organized entity which performs on a very high quality level. The changing nature of governance in sport has meant that the FIFA and UEFA must negotiate a complex network of stakeholder interest 93 . Threats which affect the corporate efficiency and reputation: lack of legislative regulation, lack of transparency in decisions making, possibility to re-elect the Presidents of FIFA and UEFA, permanent basis for General Secretary of FIFA and UEFA, Improve the strengthen of the Congress (for example when the last scandal happened the Congress didn’t resigned the Presidents, they resigned on their good will) and the last but not the least - an option to grant the title of honorary president or honorary member. Lack of legislative regulation. It is well known and common that organizations like FIFA and UEFA create different regulations, rules, directives and memorandums to cover variety of relations that are emerging nowadays in football society. And it is very easy to check how efficient this work is on a practical example. If the UEFA doesn’t care about the stakeholders dispute resolution, they are going to solve their problems without taking into consideration UEFA attitude. For example: the importance in changes is so demanded that some stakeholders of UEFA are trying to create unprecedented initiative of changing the format and rules governing. If Catalonia will be granted independence and Spanish football association will exclude FC Barcelona from the Spanish championship – the French Prime Minister Manuel Valls offered a place for the Spanish champion Barcelona in French championship Ligue One, mentioning that they have already one successful precedent94. The football team AS Monaco FC is participating in Ligue One. "I'm a huge football fan, a Barcelona fan. They're in my blood. France knows it and they ask me about it on the streets95." This example explains that if the UEFA doesn’t develop and improve, its stakeholders as clubs, associations and European Union won’t wait. Lack of transparency is crucial. The importance of transparency cannot be overestimated, that's why it will be more detailed in the next 6.2 subchapter. As was mentioned in previous chapters the re-election option allowed the last three FIFA Presidents to hold the position of for 54 years and the UEFA last three Presidents held together the President’s office for 32 years.

93 Matthew Holt: UEFA, Governance, and the Control of Club Competition in European Football, 2009, p. 19 94 http://www.telegraph.co.uk/sport/football/teams/barcelona/11958261/French-prime-minister-offers- Barcelona-a-place-in-Ligue-One.html 95 Manuel Valls – current Prime Minister of France.

The position of the General Secretary of FIFA and UEFA is a CEO position. It is difficult to imagine how in the well-known and respectful organization, for example Hewlett Packard, the CEO was on a permanent basis. That's why such an important position can’t be occupied by one person for too long. More detailed this question will be described in the sub chapter 7.2. The strength of the Congress of FIFA and UEFA is crucial. The importance of strengthening the Congress power is crucial. The freshest example when the last scandal happened the Congresses didn’t resigned their Presidents. The former President of FIFA resigned96 on his good will and the President of UEFA was suspended97 by the court decision. Honorary President and honorary members. An option to grant the title of honorary President or honorary member is inefficient. The honorary President and honorary members have the capacity to advice but without right to vote during the Congress. For some reasons it has only formal title and useless. It is not a secret that there is no perfect organization with perfect corporate governance and pure transparency. Everybody makes mistakes during the performance process, but the question is whether the threat that challenges the organization kills it or makes it stronger. For example The World Bank faced corruption scandals in the past, which threatened to tarnish its reputation98. Nevertheless, the organization managed to maintain a good public image, in part through the establishment of the Integrity Advisory Board (2008) for corruption and bribery prevention. The board included members such as anti-corruption and governance adviser. Having an independent advisory board assist the organization in dealing with such issues is helpful both in dealing with the governance issues and in providing a good communication response to the problem at hand. The FIFA and UEFA, as mentioned before, have started to adopt a similar practice. It remains to be seen what results these would yield. Few years ago the European Commission had adopted White paper on sport99. Football is organized within the parameters of a specific model of sporting governance that has become known as the “European model of sport”100. It is important to recognize the importance of this model of sport to both UEFA’s structures and the wider football governance framework in Europe. As far as the internal environment in which UEFA operates is concerned, the place of each stakeholder is guided by the philosophy and historical development underpinning this method of sporting organization. Explanation of the European model has commonly been made by drawing comparison with the organization of North American sport. Such analysis has viewed American sport to be a branch of the entertainment industry, with a profit-making imperative, and with elite sport detached from grassroots and amateur participation. This is in contrast with the

96 Sepp Blatter: Fifa president's resignation speech in full, 2015, from http://www.bbc.com/sport/football/32985676 97 Michel Platini to resign as UEFA president after Court of Arbitration for Sport reduces suspension, 2016, from http://www.abc.net.au/news/2016-05-09/michel-platini-to-quit-uefa-after-ban-reduced-to-four-years/7399224 98 Cole, J. (2007). Paul Wolfowitz’s Fatal Weakness. Spiegel. Retrieved September 25, 2012, from http://www.spiegel.de/international/world-bank-scandal-paul-wolfowitz-s-fatal-weakness-a-482945.html 99 White paper on sport – European Commission - Brussel 11.07.2007 100 European Commission Directorate General X, Sport Unit, 1999

European model, characterized as having a broader social and cultural element, and with an integral connection between elite and grassroots sport. Financial analyses of the European model, and comparisons with, for instance, the organizational structures of North American football have concentrated on the financial efficiency of two approaches, and also considered the different sporting outcomes and potential results arising from the different systems101. 6.2 Lack of transparency in making decisions Transparency has been trumpeted as the key to good governance102. Transparency will lead to an open culture that will benefit us all103. The focus in transparency literature is on governments. Government failures are blamed on a ‘culture of secrecy’104. Transparency can be conceived as an intrinsic value of democratic, accountable organizations – and thus a value in itself – or it can be seen as a means to achieve other important goals, such as less corruption. The transparency is considered as an aspect of good governance of sports federations, and thus a value in itself. However, it is not ‘the more, the better’. As we further define transparency, it can be argued that overloading external actors with a high number of inaccurate reports might be conceived as less transparent than providing less, but accurate content. Not more, but the way it is offered is important105. More flow, inclusive relationship mean that we can no longer rely on classical forms of coordination, which were oriented around hierarchic and control based relationships. All of the stakeholders in companies are less comfortable with the idea being told what to do and they will opt to leave if the working environment fails to deliver. In the past, such fixed organizational forms provided a source of comfort, but now it merely prevents or disturbs. As the relationship between stakeholders and associations becomes looser, a different form of coordination becomes necessary. How then do we ensure a more personalized environment designed to facilitate “open innovation”? How do we build these more flow and inclusive relationships? There are multiple additional potential benefits for organizations like the FIFA and UEFA in adopting this kind of open and engaged communication strategy. In particular, the associations will be better placed to make “smarter” decisions, firm “know-how” will be enhanced, problems will be more effectively dealt with, the association will develop a more extensive and deeper netting, the organizations will retain more performance related information necessary for planning, and will offer a more collaborative and meaningful environment for all stakeholders. These are just a few of a very tangible benefits that the FIFA and UEFA can enjoy if they embrace

101 Szymanski S. and Kuypers T. (2000), Winners and Losers: The Business Strategy of Football, p.11 102 Grimmelikhuijsen, S.G. (2012), Transparency and trust. An experimental study of online disclosure and trust in government. PhD thesis, Utrecht University. p. 52 103 Hood, C. (2006), Beyond exchanging first principles? Some closing comments, in: Hood, C. and Heald, D. (Eds.), Transparency: The key to better governance? Oxford: Oxford University Press 104 Roberts, A. (2006), Governmental adaptation of transparency rules, in: Hood, C. and Heald, D. (Eds.), Transparency: The key to better governance? Oxford: Oxford University Press 105 Grimmelikhuijsen, S.G. (2012), Transparency and trust. An experimental study of online disclosure and trust in government. PhD thesis, Utrecht University p. 52

31 open communication and the more personal inclusive relationship that such communication can facilitate.106 Particularly important in this context is the need for open communication between the various participants. Open communication provides a process by which stakeholders coordinate. Of course open communication involves a different form of information distribution and exchange that distinguishes relationship between all stakeholders. Such an approach involves acknowledging the possible benefits that accrue from improved flow of information inside an association, but also between the association and those “outside” the association. In particular, open communication is described by a more personal approach to communication. But open communication is not only about sharing information (the one-way dissemination of information from one part of the company to another, or from the company to external actors, most notably investors). Open communication is about building an on-going and constructive dialogue with other actors in the firm and the market that can then have a significant impact on the future performance of that company. It involves Ego disclosing all relevant information to Alter, but Alter being in a position to question Ego about Ego’s decision. Ego must then be willing to respond to such questioning and the cycle begins again. Free communication is about respect, however it is also about defining the material benefits that arise from connection. Exploitation of open communication, more inclusive and significant and relationships between association stakeholders can be imitated. Open communication educates a sense of belonging and increases the pool and diversity of stakeholders with a concrete involvement in key process of decision-making. Open communication is also connected to various aspects of complicity in, and responsibility for, decision-making within an association. In this way open communication can create a great sense of participation that makes the corporate project more significant, both from the perspective of the insiders, but also the organization.

106 Mark Fenwick, Erik P.M. Vermeulen: Disclosure of Beneficial Ownership after the Panama Papers, p. 33.

7th chapter 7.1 Ways of future development In this chapter will be mentioned the next: the main proposition of future development consist first of all in invitation of a new manager and the practical merger of the FIFA and UEFA. For the support of those two suggestions there are objective issues. As in Chapter 6 were mentioned and generally covered the challenges and threats of the FIFA and UEFA, here will be mentioned possible solutions. The items except invitation of a new manager and the practical merger of the FIFA and UEFA will be just mentioned here because the explanation will exceed all the possible measures: there are many but the main are: 1. The most important – to improve the transparency; 2. Invitation of fully independent manager or CEO; 3. Possible merge of FIFA and UEFA. The other propositions are also very important but need a long period of adaptation and they are: eliminate the possibility to re-elect the president for more than twice, eliminate permanent basis for General Secretary of UEFA, change the legal form from non-profit Association (under article 60 of Swiss Civil Code) to other commercial entity and pay taxes, improve the strengthen of the Congress (for example when the last scandal happened the Congress didn’t resigned the Presidents, they resigned on their good will), eliminate any honorary title of president or members, improve the product – for many years associations, different organizations, official representatives and even millions of ordinary people all over the world propose to improve the rules, for example add modern technologies (in some kinds of sport it is used for many years and isn’t innovative anymore) like: video reply, sensor ball, improve the doping control. The importance of social media is difficult to overestimate, because if just to google or hashtag #FIFA or #UEFA in Twitter or Facebook the results will be fascinating. Millions of people all over the world are subscribed for the FIFA and UEFA pages on the YouTube, Facebook, Twitter and other social global networks. Even only Twitter numbers are impressive: almost nine million followers on the official FIFA twitter page107 and over 3 million of the UEFA108. Additionally there are 11.7 million UEFA Champions League, over four million of FIFA World Cup and over three million of UEFA Europa League twitter followers. Generally the FIFA, UEFA and the tournaments they organize roughly calculate 30 million followers. This is a huge army of supporters all over the world. But without development it looks like the UEFA and FIFA use the policy of exploitation of the popularity of the product they operate – the football. And the last year’s trends show a deep concern of the FIFA and UEFA policy. Social capital, which is built in sport, helps to maintain and reproduce a normative framework that is contradictory to idealized myths about sport being exclusively beneficial.

107 https://twitter.com/FIFAcom 108 https://twitter.com/UEFAcom

Sports clubs and national sport governing bodies members tend ‘to maintain the essence of the sport they know and love’, which does not necessarily mean that the sport is safe based on fair play rules and codes of ethics, but it can rather be normatively framed by values such as winning at any price and top-down domination. There is no doubt that sport might contribute to the diffusion of downward levelling or conformity109. 7.2 Possibility and benefits of invitation of independent CEO The most essential basis is to create the legal platform for efficient performance of a new CEO: - option of electing only once (considering the importance of the position) - the person must be out of the system of FIFA and UEFA As was mentioned above the position of the Secretary General is the position of CEO. First, the CEO must learn to manage organizational context rather than focus on daily operations. Providing leadership in this way—and not diving into the details— can be a jarring transition. One CEO said that he initially felt like the company’s “most useless executive,” despite the power inherent in the job. The CEO needs to learn how to act in indirect ways—setting and communicating strategy, putting sound processes in place, selecting and mentoring key people— to create the conditions that will help others make the right choices. At the same time, he must set the tone and define the organization’s culture and values through his words and actions—in other words, demonstrate how employees should behave. Second, he must recognize that his position does not confer the right to lead, nor does it guarantee the organization’s loyalty. He must perpetually earn and maintain the moral mandate to lead. CEOs can easily lose their legitimacy if their vision is unconvincing, if their actions are inconsistent with the values they espouse, or if their self-interest appears to trump the welfare of the organization. They must realize that success ultimately depends on their ability to enlist the voluntary commitment rather than the forced obedience of others. While mastering the conventional tools of management may have won the CEO his job, these tools alone will not keep him there. CEOs can easily lose their legitimacy if their vision is unconvincing, if their actions are inconsistent with the values they espouse, or if their self-interest appears to trump the welfare of the organization. Finally, the CEO must not get totally absorbed in the role. Even if others think he is omnipotent, he is still only human. Failing to recognize this will lead to arrogance, exhaustion, and a shortened tenure. Only by maintaining a personal balance and staying grounded can the CEO achieve the perspective required to make decisions in the interest of the company and its long-term prosperity110. Bearing full responsibility for a company’s success or failure, but being unable to control most of what will determine it. Having more authority than anyone else in the organization, but

109 D. Numerato, S. Baglioni: The dark side of social capital: An ethnography of sport governance 110 M.E. Porter, J.W. Lorsch and N. Nohria: Seven Surprises for New CEOs, 2004

34 being unable to wield it without unhappy consequences. Sound like a tough job? It is—ask a CEO. Surprised by the description? So are CEOs who are new to the role. Just when an executive feels he has reached the pinnacle of his career, capturing the coveted goal for which he has so long been striving, he begins to realize that the CEO’s job is different and more complicated than he imagined111. While the CEO is responsible for the successful operation of the enterprise, then, he can no longer be personally involved in all the decisions needed to run a large, complex organization. The CEO’s greatest influence shifts from direct to indirect means—articulating and communicating a clear, easily understood strategy; institutionalizing rigorous structures and processes to guide, inform, and reward; and setting values and tone. Equally important is selecting and managing the right senior management team to share the burden of running the company112. A new CEO may need to put a stake in the ground to show that he’s in charge and to let the organization know what he stands for. Giving a direct order (and especially undoing someone’s work) is rarely the best way to do this, however. Instead, a CEO should look for ways to include senior managers and to promote agreement about decision-making criteria. At an off- site meeting, for example, the CEO can reveal his priorities and concerns by setting the agenda while giving his team a chance to participate and buy in. A new CEO must be willing to share power and trust others to make important decisions. The most powerful CEO is the one who expands the power of those around him113. The Arrow process won’t be useful in every case. If an organization wants a CEO to manage a company out of a crisis, it might need Attila the Hun. But if a company is healthy and stable, I suggest making a process like Arrow’s a condition of the job for its next CEO. If the CEO accepts, that’s a signal that he can put aside his ego and acknowledge that he’s not perfect, and is open to receiving counsel. At the end of the day, my experience has taught me that it’s when CEOs think they no longer need real, credible feedback that they get into trouble114. 7.3 Possibility and benefits of FIFA and UEFA merger A variety of reasons exist why organizations like FIFA and UEFA consider merging115, including preserving the mission, crystalizing the structure, improving existing services, and expanding services. Sometimes external events like misunderstanding of FIFA world Cup host country or Panama Papers scandal trigger the changes and it could be a merger. These

111 M.E. Porter, J.W. Lorsch and N. Nohria: Seven Surprises for New CEOs, 2004, from https://hbr.org/2004/10/seven-surprises-for-new-ceos 112 M.E. Porter, J.W. Lorsch and N. Nohria: Seven Surprises for New CEOs, 2004, from https://hbr.org/2004/10/seven-surprises-for-new-ceos 113 M.E. Porter, J.W. Lorsch and N. Nohria: Seven Surprises for New CEOs, 2004, from https://hbr.org/2004/10/seven-surprises-for-new-ceos 114 S.P. Kaufman: Evaluating the CEO, 2008. From https://hbr.org/2008/10/evaluating-the-ceo 115 Dominique Jakob, Roman Huber and Katharina Rauber. “Nonprofit Law in Switzerland.” Working Papers of the Johns Hopkins Comparative Nonprofit Sector Project, No. 47. Baltimore: The Johns Hopkins Center for Civil Society Studies, 2009, p. 8

35 organizations may consider a merger to develop greater organizational efficiencies related to programming, administrative capacity, or transparency116. The main triggering reason for FIFA and UEFA merger is that every year annual revenue of UEFA is twice higher than FIFA’s. The UEFA is much healthier and strengthener than FIFA because of constantly intense regime of competitions it is responsible for organizing. For example UEFA Champions League and UEFA Europe League take part every year from July at qualifications and end up in May next year at finals. And also once for four years it organizes UEFA Euro tournament. On the contrary FIFA organizes on such intensive high level only FIFA World Cup once for four years. The Swiss law allows a merger of non-profitable organizations. Let’s contemplate theoretical merger of FIFA and UEFA. With the last scandals, the call for good governance has finally reached the traditionally closed sporting world117. That this happened much more slowly in sport than in other sectors has to do with the fact that the world of sport is traditionally regulated in all its aspects through a self-governing network with its own rules and regulations. For almost a century, the sporting network was able to exercise its self-governance without any significant interference from states or other actors118. According to Article 76 of the Swiss Civil Code, the association may be dissolved at any time by resolution of their members. The association is dissolved by operation of law if it is insolvent or if a committee can no longer be appointed in accordance with the articles of association119. Where the purpose of the association is unlawful or immoral, the competent authority or an interested party can apply for a court order of dissolution120. On dissolution, the Law of Associations does not contain any specific provisions concerning the distribution of assets and liquidation. Thus, the general art. 57 and 58 Swiss Civil Code apply which refer for example to the liquidation regulations set forth for cooperatives121. Based on the Swiss Merger Act, dated 3 October 2003 and effective 1 July 2004, associations are allowed to merge. Both forms, the absorption and the combination are permitted122. If the association has not been entered into the commercial register, it may only merge with other associations123. Associations that have been entered into the commercial register may also merge with corporations and cooperatives as transferring companies, and with

116 Greg Owen, Laura Martell Kelly, Brian Pittman and Brittney Wagner: What do we know about nonprofit mergers? - Wilder Research, 2011 117 Sugden, J. and Tomlinson, A. (1998). FIFA and the contest for world football: who rules the peoples’ game? Cambridge: Polity press. 118 Geeraert, A., Scheerder, J., Bruyninckx, H. (2012). The governance network of European football: introducing new governance approaches to steer football at the EU level. International journal of sport policy and politics, Available from http://www.tandfonline.com/action/authorSubmission?journalCode=risp20 (Accessed 22 January 2013) 119 Article 77 of Swiss Civil Code 120 Art. 78 Swiss Civil Code; Rulings of the Swiss Federal Court 63/281 121 Art. 913 Swiss Code of Obligations 122 Art. 3 Swiss Merger Act 123 Art. 4 para. 4 Swiss Merger Act

36 cooperatives without capital as absorbing companies124. The supreme managing organs conclude the merger agreement in writing which is then subject to approval by a general meeting of the involved entities (art. 12 Swiss Merger Act), whereat at least three quarters of the ‘members’ of the involved associations who are present at the general meeting must approve the merger (art. 18 para 1 lit. e Swiss Merger Act). There are a variety of reasons organizations consider merging, including preserving the mission, improving existing services, and expanding services. Sometimes external events trigger a merger125. Advantages and disadvantages of FIFA and UEFA merger: - better corporate governance; - synergy effect; - experience sharing; - combination of local and global impacts. High profile scandals related to corruption teach us that there probably is something wrong, but we have no clear image of the magnitude of the structural organizational issues in the governance of INGSOs126 Let’s imagine the possible performance: - FIFA is better in organizing the national team tournaments (FIFA can take all European and World cups of national teams); - UEFA is better in organizing the clubs competitions (UEFA can take all the European and World club competitions); - Organizational structuration; - Cost reduce. An organization may believe a merger will engage community leaders or board members, or increase their community profile. One of the most frequent events that trigger merger considerations is the loss of an executive, especially if it is a long-serving executive. In this case, an organization may consider a merger to benefit from the leadership of another organization. Methods for classifying and defining mergers and strategic restructuring. Structural realignments of nonprofit organizations are often grouped into alliances, which do not involve change to the corporate structure, or integrations, which do. They include management service organizations, joint ventures, parent/subsidiary relationships, and mergers. For purposes of this research study, a merger is defined as an integration or combining of two or more separate

124 Frey, M. (2003): Art. 3 - 6 Merger Act, in: Stämpfli’s Commentary, Baker & McKenzie (eds.): Merger Act: Swiss Federal Act on Merger, De - merger, Conversion and Transfer of Assets and the Relevant Provisions of the IPRG (Swiss Federal Law on International Private Law) and the Tax Law), Bern p. 29 125 Greg Owen, Laura Martell Kelly, Brian Pittman and Brittney Wagner: What do we know about nonprofit mergers? - Wilder Research, 2011 126 Good governance in International Non‐Governmental Sport Organizations: an analysis based on empirical data on accountability, participation and executive body members in Sport Governing Bodies, 2011

37 organizations into one legal entity. Under this definition, program, administrative, and governance functions are all combined127. There are three groups of rounds thought to affect a successful merger and they are: - pre-merger; - merging process - post-merger. The pre-merger group of rounds is a time of due diligence, internal assessment and consideration of which other entities might be viable merging partners and consists of four stages: financial soundness, external conditions, organizational structure and leadership. Financial soundness of the merging organizations. Many nonprofits associations 128 explore mergers to improve their financial standing for short-term survival or long-term viability. However, organizations need a certain level of financial stability prior to a merger in order to be a successful merger partner. Experts warn that it may be too late for associations to consider a merger if they are in a desperate economic problems. In addition, agencies and boards need to be aware of the monetary costs of considering and conducting a merger129. External conditions, including environmental changes (for instance, the current unstable financial environment) and increased competition for efforts, change the operating environment so non-profits favor restructuring or choose merger and acquisition for stable or survival. Funder pressure or encouragement to consolidate or merge is also a factor within this stage. Factors related to organizational structure include physical conditions such as size, finances, and bridge. In addition, it is important to be aware of factors related to compatible values in terms of mission, strategy, and culture. The data also suggests that mergers will be more successful when there is a good pre-merger relationship among executive professionals of the associations. Leadership is the factor associated during the pre-merger stage with the presence of strong and committed management who can form a mental image and articulate the importance of merging and the factor is abandoning of the leadership. The group of rounds in the merging process is focuses on how and under what conditions an organization might work with another and which organizational characteristics they wish to preserve. There are 10 factors imposed in this chapter that are associated with the merging process stage and they can be divided into four categories. First category is - key stakeholder involvement. Key stakeholder involvement starts with an executive personnel defend committed to the merger’s success. There are also, other issues like associations should consider how stakeholders can be involved. Role of management in merger process. Because the success of the everyday operations of a non-profit entities is so

127 Greg Owen, Laura Martell Kelly, Brian Pittman and Brittney Wagner: What do we know about nonprofit mergers? - Wilder Research, 2011 128 Dominique Jakob, Roman Huber and Katharina Rauber. “Nonprofit Law in Switzerland.” Working Papers of the Johns Hopkins Comparative Nonprofit Sector Project, No. 47. Baltimore: The Johns Hopkins Center for Civil Society Studies, 2009, p. 6 129 Greg Owen, Laura Martell Kelly, Brian Pittman and Brittney Wagner: What do we know about nonprofit mergers? - Wilder Research, 2011

38 connected with the work of the front-line staff, it is logical that staff involvement in planning can increase the likelihood of a successful merger. As well, communication with personnel throughout the process can improve and help reduce personnel’s negative sensations of the effects of the merger. The other step is - integrating formal and informal structures. As associations engage in the merging process they often assume factors related to cultural connections of the merging organizations will bring both operational philosophies - that can be divaricated. Very important issue – due diligence of the process. A clear process of making decision and a clear and realistic period frame grant due diligence to the merger process. They help both associations the FIFA and UEFA involved gain a clear image of the legal, social and economic status or each organization. An independent, unbiased legal adviser can add leadership to the decision making process by helping to improve a plan and recognizing issues to be addressed130. After above mentioned there is the post-merger process. Within the post-merger process, the merged association begins to operate without outside help131. Whereas non-profit merger studies often finish at the actual merger, there is lack of information about the post-merger process and the result that merger has on services provided by associations. There are eight factors identified in the chapter that are associated with the post-merger round. They can be grouped into four types: funding and support (after the merger has taken place, the focus turns to the economic stability of the new association; the other concern of post-merger is whether the association improves its reputation and global support), services (consists of two factors important for the post-merger round: the saving of services, or the development of service types or service areas and the other thinking whether the merger has better quality of existing services, either through more effective service delivery, more comprehensive services, or both), climate and culture (two clear post-merger organizational culture and climate factors: organizational identification – which features how the personnel and stakeholders relate to the merged association and the conflict and morale issues associations experience following a merger) and the last but not the least - organizational capacity and structure. Following a merger, organizations need to consider whether they have increased tactical efficiencies and economies of scale including reducing obverse expenses or employing professional employees in more efficient ways. Another consideration is whether they better support the mission because of structural changes within personnel, management, and governance.

130 Greg Owen, Laura Martell Kelly, Brian Pittman and Brittney Wagner: What do we know about nonprofit mergers? - Wilder Research, 2011 131 Dominique Jakob, Roman Huber and Katharina Rauber. “Nonprofit Law in Switzerland.” Working Papers of the Johns Hopkins Comparative Nonprofit Sector Project, No. 47. Baltimore: The Johns Hopkins Center for Civil Society Studies, 2009, p. 8

Conclusion

In this work the structure and activity of the FIFA and UEFA was described from the purpose of the most strong and influential non-governmental and non-profitable organizations in the world. Features of non-profit organizations under Swiss law. Also there were mentioned problems with transparency and the importance of the transparency in comparing with good governance, because transparency is always good governance. These two non-profitable and non-governmental organizations have significant impact on social life of millions of ordinary people. But at the same time their activity is always involved in scandals. The social impact through the social network like Facebook and Twitter showed an impressive and magnifical influence of FIFA and UEFA in our everyday life, and thirty millions of followers is the best evidence. It will be difficult to avoid the attention to football in summer 2016 when UEFA will conduct its tournament in France. Presumably the organizations will benefit from the current scandal situations and would never repeat old mistakes. Taking into consideration that both FIFA and UEFA provide a wide range of reports, starting with financial reports, reports of the FIFA and UEFA Presidents, Executive Committees, Administration, continuing with Activity and Sustainability reports, but still these associations remain in a total informational solitude. Also there was mentioned about possible solutions of problems and the most particular suggestions of future development. There are many questions that are waiting for the answers, and the global community is controlling it now, but from the corporate governance perspective through the transparency dimension there are two. The proposition first of all was to invite a new absolutely independent manager. Another one - a practical merger of the FIFA and UEFA. On the other hand the new world is emerging innovation, development and transparency. Last example of Panama Papers scandal showed that these associations have a lot to do with their governance reform, because at this time standards are higher than it was when the organizations were established. In the last chapters the state of being of great value demonstrates the inevitability of development of the corporate governance of both FIFA and UEFA towards transparency.

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